Title of article :
Inflationandthestockmarket:Understandingthe‘‘FedModel’’$
Author/Authors :
Geert Bekaert، نويسنده ,
Issue Information :
روزنامه با شماره پیاپی سال 2010
Abstract :
The so-calledFedmodelpostulatesthatthedividendorearningsyieldonstocksshould
equaltheyieldonnominalTreasurybonds,oratleastthatthetwoshouldbehighly
correlated.InUSdatathereisindeedastrikinglyhightimeseriescorrelationbetweenthe
yieldonnominalbondsandthedividendyieldonequities.Thispositivecorrelationisoften
attributedtothefactthatbothbondandequityyieldscomovestronglyandpositivelywith
expectedinflation.Contrarytosomeoftheextantliterature,weshowthatthiseffectis
consistentwithmodernassetpricingtheory incorporating uncertaintyaboutrealgrowth
prospects andhabit-basedriskaversion.IntheUS,highexpectedinflationhastendedto
coincidewithperiodsofheighteneduncertaintyaboutrealeconomicgrowthandunusually
highriskaversion,bothofwhichrationallyraiseequityyields.
Keywords :
Money illusionEquity premiumCountercyclical riskaversionFed modelInflationEconomic uncertaintyDividend yieldStock–bond correlationBond yield
Journal title :
Journal of Monetary Economics
Journal title :
Journal of Monetary Economics
